2. Dan used their 2014 earnings and sales, to be consistent with the ways the price ratios were calculated for competitors. If Dan took average price from estimation based on price-earnings ratio and price-sales ratio, what is Dan's price estimate using the comparables approach? What are the pros and cons of Dan's preferred approach?

What is Joe's price estimate if he were to use a 3-stage growth model with growth assumptions of 30% for the first 3 years, followed by 20% for the next two years, and a long-term growth assumption of 6% thereafter? Assume that the firm pays a dividend of $1.50 per share at the end of the first year after IPO. Joe estimated required return to be 13.73% and used it to discount dividends.